Almost since its establishment, Hong Kong, more than any other treaty port, afforded a refuge for runaway persons and capital from China as well as an interim abode for rural emigrants destined for Southeast Asia and beyond. Such movements of Chinese people between China and Hong Kong were free and were highly responsive to the political and economic conditions in China. After the establishment of the Republic of China in 1912, proponents of emerging nationalism sought to abolish all foreign treaty privileges in China. A boycott against foreign goods particularly hurt Britain, which was well established in China. The campaign soon spread to Hong Kong, where strikes in the 1920s caused agitation.

When the Sino-Japanese War broke out in 1937, Hong Kong was once more a refuge, with thousands of Chinese fleeing to it before the advancing Japanese. With the outbreak of war in Europe in 1939, the position of the colony became more precarious, as it was now a target; the Japanese attacked and occupied Hong Kong in December 1941. During the war years Hong Kong’s commerce was drastically impaired; food was scarce, and many residents fled to inland China. The population, which had numbered 1,600,000 in 1941, was reduced to about 650,000 by 1945 when the Japanese surrendered.

Contemporary Hong Kong

British troops returned to the city on Aug. 30, 1945, and civil government was reestablished in May 1946. Meanwhile, hundreds of thousands of Chinese and foreigners returned, and they were soon joined by economic and political refugees from China, who were fleeing the civil war between the Nationalist and communist armies.

The United Nations embargo in 1951 on trade with China and North Korea during the Korean War seriously curtailed the entrepôt trade, the lifeline of the colony, and for several years conditions were depressed. Hong Kong began its revival on the basis of light industries such as textiles, which were set up by immigrant capitalists and provided needed employment. These soon assumed their importance in the economy, providing as well the basis for further industrialization. But it was because much of the development depended on cheap labour, which toiled under extremely poor working conditions, that labour disputes and social discontent began to spread in the early 1960s. Severe riots broke out in Hong Kong and Kowloon in May 1967 following a labour dispute in a plastic-flower factory. The economic and social unrest was immediately turned into violent political demonstrations, largely inspired by followers of the Cultural Revolution (1966–76) in China. When the situation stabilized toward the end of the 1960s, general working and living conditions were notably improved by labour legislation, large government housing projects, and extensive public works programs. Simultaneously, high-technology industries such as electronics were developed, and the property and financial markets prospered until early 1973, when the stock market collapsed as billions of dollars were drained out of Hong Kong. From the mid-1970s the economy resumed its upward trend as relations with China improved.

In the late 1970s, concern about the future of Hong Kong began to loom large, as British jurisdiction over the leased areas of the New Territories neared the 1997 expiration date. Although the lease applied only to the New Territories, the Chinese government had consistently maintained that the whole of Hong Kong was Chinese territory and considered that the question of the earlier Hong Kong–British agreements came under the category of unequal treaties and also required resolution. Initial contacts between the two governments on the matter were made from March 1979, but formal negotiations did not start until after the visit of the British prime minister to Beijing in September 1982. Negotiations continued for two years. Finally, the Chinese-British joint declaration on the question of Hong Kong was formally signed by the heads of the two governments in Beijing on Dec. 19, 1984. The agreement stipulated that Hong Kong (including Hong Kong Island, Kowloon, and the New Territories) would be recovered by China from July 1, 1997. There ensued a period of often difficult negotiations between Hong Kong and Beijing on the final wording of the document by which Hong Kong would be governed under Chinese sovereignty. Despite some reservations from Hong Kong, the National People’s Congress formally ratified the Basic Law on April 4, 1990, which took effect on July 1, 1997, and established the Hong Kong Special Administrative Region directly under the Chinese central government.

The years after reunification generally were prosperous, as Hong Kong’s economy experienced steady growth, despite its heavy dependence on global economic conditions. The already significant economic ties with the mainland increased even more dramatically than before reunification. In addition, major resources were devoted to improving the region’s transportation infrastructure, which included new bridges and roadways in addition to the new airport. Politically, there were sustained calls for democratic reforms to the Basic Law that, at times, included large demonstrations and pressure from opposition-party members in the Legislative Council (LegCo). By the 2004 legislative elections, Beijing was allowing half of the LegCo seats to be directly elected from geographic constituencies, with the other half selected from business and professional groups known as “functional constituencies.”

Hong Kong was hit hard by an outbreak of severe acute respiratory syndrome (SARS) in 2003, which killed some 300 people there and 350 more on the mainland and, for a time, significantly reduced tourism in the region. However, the crisis soon passed, and tourism rebounded. Hong Kong was the venue for the equestrian events during the 2008 Olympic Games, and it hosted the 2009 East Asian Games.

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